U.S. DOL won’t enforce 2024 independent contractor rule, but it’s still the law of the land
On May 1, the U.S. Department of Labor’s Wage and Hour Division (WHD) issued a Field Assistance Bulletin (FAB) to provide guidance to WHD field staff, and indirectly employers, about how to determine if someone should be classified as an employee or an independent contractor for purposes of complying with the federal Fair Labor Standards Act (FLSA).
In a WHD press release, the agency said they’re reviewing the 2024 Independent Contractor rule that went into effect during President Biden’s term. The rule is also being challenged in federal court.
For now, WHD investigators have been instructed not to apply the 2024 rule when they’re investigating and enforcing FLSA employment matters. Instead, the WHD will look back to the 2008 Independent Contractor rule, relying on two other sources for compliance enforcement, in addition to the FAB:
- Fact Sheet #13: This fact sheet from 2008 provides general information concerning the meaning of “employment relationship” and the significance of that determination in applying provisions of the FLSA.
- Opinion Letter FLSA2019-6: This letter addresses classification in the context of virtual marketplace platforms. The WHD claims it provides greater clarity for businesses and workers navigating modern work arrangements while legal and regulatory questions are resolved.
The 2024 rule isn’t dead (it’s sleeping)
This recent guidance does NOT change the existing regulations relating to employee classification (or misclassification) but has more to do with how the WHD is allocating enforcement resources during the review of the 2024 rule. The 2024 rule will still be the basis of any private litigation.
The 2025 FAB doesn’t change employee rights or employer responsibilities dictated by the FLSA. The FAB does, however, supersede any prior or conflicting guidance provided to WHD staff on enforcement related to independent contractor misclassification. The agency may still exercise enforcement authority in certain individual cases.
Table comparing the two federal Independent Contractor rules:
2024 Independent Contractor rule: | 2008 Independent Contractor rule: |
Still stands but won’t be enforced. Will be used in private lawsuits. | Used as a guide for WHD field agents, and indirectly by employers, since the agency won’t be enforcing the 2024 rule. |
Allows all factors to be weighed equally; no predetermined weight is assigned to a particular factor or set of factors. | The U.S. Supreme Court indicates that there is no single rule or test for determining whether an individual is an independent contractor or an employee for purposes of the FLSA. |
Uses a 6-part multifactor, “totality-of-the-circumstances” approach to classifying workers. | Uses a 7-part “economic realities” test rather than “technical concepts.” |
Uses the longstanding interpretation of the economic reality factors. These 6 factors include the: 1. Opportunity for profit or loss depending on managerial skill, 2. Investments by the worker and the potential employer, 3. Degree of permanence of the work relationship, 4. Nature and degree of control, 5. Extent to which the work performed is an integral part of the potential employer’s business, and 6. Worker’s skill and initiative. | Among the 7 factors which the Court has considered significant are: 1. The extent to which the services rendered are an integral part of the principal's business. 2. The permanency of the relationship. 3. The amount of the alleged contractor's investment in facilities and equipment. 4. The nature and degree of control by the principal. 5. The alleged contractor's opportunities for profit and loss. 6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor. 7. The degree of independent business organization and operation. |
The bottom line
The FLSA is the federal law that addresses employment rules like minimum wage for hourly/nonexempt workers, overtime pay, etc. Company employees are protected by the FLSA, whereas independent contractors are not.
Employers should ensure they’re complying with all federal, state, and local employment laws, especially when it comes to properly classifying workers as either employees or independent contractors. Also, workers may not voluntarily waive their employee status and choose to be classified as an independent contractor.
Key to remember: The U.S. DOL issued a Field Assistance Bulletin in May instructing its field agents to use the 2008 Independent Contractor rule, not the 2024 one, in misclassification matters. The 2024 rule, however, remains the official law of the land, but it won’t be enforced and is under review.